Imagine the following scenario: Kim and her boyfriend Kanye decide they want to get married. Kim and Kanye have acquired a lot of money, bling, and swag throughout their years of work in music and promotions. Kim, being the more cautious one, decides that before she and Kanye get married, they should sign a premarital agreement (better known by some as a prenuptial agreement or “prenup”) to protect herself in the event that fame wreaks havoc on the fledgling marriage.
Kim’s attorney drafts a premarital agreement that provides, among other things, that Kim’s earnings from the businesses which she started before her marriage, including her reality show, clothing line, and promotional appearances, will remain her sole and separate “non-marital” income. Kim’s attorney gives the agreement to Kanye, who briefly glances at it while laying down a track, and signs it, without having his attorney review it.
Three months after the wedding, Kim decides the whole “marriage thing” is not right for her and files for divorce, in Illinois of all places. During their short marriage, she has raked in a grand total of $3,000,000 in earnings from her various non-marital businesses. In court, Kanye argues that the premarital agreement should be invalid. He also argues that, even if it is found to be valid, that Kim’s $3,000,000 in earnings are marital in nature and that he should get half. What should the result be for poor Kanye?
Premarital agreements in Illinois
In Illinois, premarital agreements are governed by the statute entitled the Illinois Uniform Premarital Agreement Act. The type of agreement Kim and Kanye entered into is defined as an agreement between soon-to-be spouses made in contemplation of marriage and to become effective upon the marriage. It is required to be in writing and signed by both parties in order to be an enforceable contract. Any amendments and revocations must also be in writing.
A premarital agreement can address issues such as the rights and obligations of each party in all types of property; the right to buy, sell, and dispose of property; and it can provide for the disposition of property upon separation, divorce, death, or the occurrence or nonoccurrence of any other event. The agreement can modify or eliminate spousal support, require the parties to make a will, trust, or other document carry out terms of the agreement, or do anything that is not in violation of public policy or any statute imposing criminal penalties.
A divorce court may deem a premarital agreement invalid if it was executed under duress or coercion, or if it was unconscionable at the time it was signed. “Duress” means the inability of either person to exercise free will, which can occur, for example, if one person did not have an attorney, did not read the agreement, or was not properly explained the contents of the agreement, among other things. “Unconscionable” means the absence of a meaningful choice of a person where the agreement favors the other person, meaning the agreement is totally one sided or oppressive. In order to determine if the agreement is unconscionable, a court can consider the conditions under which the agreement was made and the economic circumstances of each party resulting from the agreement. Somewhat surprisingly, conditioning the marriage on the signing of the premarital agreement is not coercion.
Now back to the Kim and Kanye dilemma. Is the premarital agreement valid? If so, is Kim’s income that she earned during the marriage her own property, or should it be shared between her and Kanye?
Income, the Illinois Marriage and Dissolution of Marriage Act, and premarital agreements
In Illinois, normally income earned during the marriage is considered marital property so it may be divided between spouses upon a divorce. Also, income earned from non-marital property, if it is not attributable to the personal effort of a spouse, remains non-marital. For example, appreciation of a non-marital asset such as a share of stock or parcel of real estate is often not the result of personal efforts, and would remain non-marital property. However, in Kim’s situation, she has earned income during her marriage by putting forth her personal efforts to build her non-marital businesses.
Without the premarital agreement, if Kim does not completely separate her non-marital business asset and the money generated therefrom, from her marital accounts and assets, Kanye could raise a claim that he should be entitled to a portion of the income generated from her efforts put into the non-marital businesses. The Illinois Marriage and Dissolution of Marriage Act provides that non-marital property is the increase in value of non-marital property, irrespective of whether the increase results from a contribution of marital property, non-marital property, the personal effort of a spouse, or otherwise, subject to the right of reimbursement. Kanye could argue that he should be reimbursed for a portion of Kim’s personal efforts, which she made during the marriage, and substantially increased the value of her non-marital businesses.
What then of Kim’s premarital agreement which provides, no matter what, Kim’s income earned from her non-marital businesses should remain her own non-marital property? If Kayne argues that the provision is invalid or that he should be entitled to some of the income, Kim would have to overcome the presumption that the personal effort she put forth is “marital” in nature by presenting clear and convincing evidence to prove the income should be non-marital, because it was excluded by the premarital agreement.
In the end it appears that Kanye might have a valid claim that the premarital agreement should be set aside. He did not have a full disclosure of Kim’s finances. Additionally, he signed the agreement without a lawyer and without reading it thoroughly. However, if he had done so, it appears that Kim’s earnings could be deemed as her separate, non-marital property because of the language of the premarital agreement, as long as the agreement is not totally one-sided in her favor.
Premarital agreements are useful tools to protect a person’s assets when the parties marry. Consult with an attorney that is well-versed in the law to maximize the likelihood that the agreement will hold up in court.